As the situation in the European Union continues to get worse, with the sovereign debt concerns spreading towards other week countries in the EU, the trading market continues to suffer. Risk aversion started to make a new appearance on the market, despite the fact that traders have tried to ignore their concerns for a few days. This has had a negative impact upon the risky currencies which have fallen this week, but it has definitely been in the favor of safe-havens, which have managed to grow due to this new wave of risk aversion.
The Japanese Yen has been growing throughout the week due to these concerns related to the sovereign debt crisis. This growth is especially related to the surging borrowing costs of the European countries which have had the effect on the trading sentiment, causing traders to let their concerns influence their trading once more. Moreover, as it is true that there are not so many safe-havens, it is only normal that traders chose the Japanese Yen. Traders can no longer chose the Swiss Franc after the moment when the Swiss Central Bank took the decision of pegging the currency to the Euro. Moreover, the US Dollar is now faced with the possibility of more quantitative easing, which would weaken the currency, fact which has caused traders not to have confidence in the currency. Even though the end of the week has brought a easing of the risk aversion sentiment, causing thus the Japanese Yen’s rally to take a pause, traders did not immediately shifter to risk appetite.
Looking over the events of the week, we can notice that the performance of the Japanese Yen against the Euro and the commodity currencies has virtually been identical. Based on the fluctuation of the trading sentiment, we can say that the Yen has rallied for the entire week, stopping on Friday, when the risk aversion calmed down a little. However, the evolution of the Japanese Yen against the US Dollar has been rather different. Even though the US Dollar has also advanced during the week, it seems that its evolution has been weaker than the one of the Japanese Yen, which has generated an almost unstoppable fall of the USD/JPY pair.
Based on these facts, the JPY gained a lot this week. The EUR/JPY pair opened at the value of 106.68 fell to the weekly low of 103.39 and closed at the value of 104.01. The GBP/JPY pair decreased from 124.24 to 121.49. The AUD/JPY pair went down from 79.88 to 76.95. The USD/JPY pair decreased from 77.24 to 76.87.
The Great Britain Pound has grown on Friday due to the positive macroeconomic data from the US and to the speculation according to which the Federal Reserve is intending to make the monetary policy even more accommodative. The US leading index has increased by 0.9 percent in October, after the growth of 0.1 percent which took place in September. Also, the rising building permits number has increased and the unemployment claims have decreased. This means that the US economy is recovering. The Standard & Poor’s 500 index to grow by 0.5 percent. The slowing inflation, the decreasing PPI and the worsening consumer sentiment are signs which indicate that the US economy is not yet out of danger.
On Friday, as the risk aversion sentiment has stopped, traders started to pay attention to the GBP instead of safe-havens, causing the currency to grow. The GBP/USD pair closed at 1.5802, after opening at 1.5752 and reaching the daily high of 1.5887.